Using Revealed Preference Behavioral Models to Correctly Account for Substitution Effects in Economic Impact Analysis
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This study presents a methodology to correctly account for substitution patterns in estimates of final demand used in economic impact analysis. Then, this methodology is demonstrated empirically using recreational tourism data. Specifically, this study a) presents the results of a behavioral model for recreation demand; b) uses the predictions from this model to drive changes in final demand for an input-output economic impact model; and c) presents results from this impact model, contrasting them with the naïve assumption of no/limited substitution. Empirical results indicate that failure to account for substitution in final demand could result in gross overestimates of economic impacts.